This book is concerned with financial aspects of contracting from the perspective of the authors’ combined experience in the industry of some 70 years. The aim is to explain ‘how things operate’ in the ‘real world’ of contracting to those who wish to understand and if this means opening the ‘black box’ of financial practice both good and bad then so be it. The book is not intended to be an exposé of the ‘evils’ of the industry but is meant to illustrate good practice in financial control whilst at the same time being honest about some of the questionable practices that can and do happen. This text is unique as it considers project financial management from a contractor’s quantity surveyor’s perspective. It deals with the real issues that surveyors have to take into account when using their judgement to report turnover, cash flow, profitability and work in progress on projects.
The book considers the wide variety of external factors that influence how construction companies operate, these include changes to construction markets driven by government policy, how government legislation influences contract conditions and banking covenants. Companies are required to have systems and procedures that comply with accounting regulations and also that provide management with information upon which to base future decisions regarding marketing, tendering and resource allocation.
The textbook considers the financial aspects of supply chain management and how organisations seek to minimise their cash needs. Cost reporting systems are described and real life examples of cost reports are used to illustrate cost reports, accrual systems and how computerised systems provide the QS which information that can be audited. The text also uses examples drawn from practice which demonstrate how work in progress is reported. Cost value reconciliation reports which include adjustments for overmeasure, undermeasure and WIP clearly identify the processes that contractors use when analysing external valuations. The text also considers newer approaches such as earned value analysis to project reporting.